$650K tax exemption sought for new ESU dorms

Friday

Oct 5, 2012 at 12:01 AM

School and municipal attorneys strongly object to a request by operators of two new East Stroudsburg University dorms for a full property tax exemption worth $650,000 per year, calling the justification an "elaborate" accounting avoidance scheme.

DAVID PIERCE

School and municipal attorneys strongly object to a request by operators of two new East Stroudsburg University dorms for a full property tax exemption worth $650,000 per year, calling the justification an "elaborate" accounting avoidance scheme.

Hemlock Suites and Hawthorne Suites, built near the ESU library, house about 1,000 students.

The project is owned and operated, not by the university, but by a nonprofit board established by ESU that says it qualifies as a charitable group entitled to the exemption.

The land where the dorms sit already receives a tax exemption, but the buildings are fully assessed for school, municipal and county taxes.

The Monroe County Assessment Board, composed of the three county commissioners, heard a request Wednesday to also make the dorms exempt from property taxes.

University Properties Inc., established in 2003 to provide ESU housing, meets tax exemption requirements partly by donating more than 5 percent of its annual revenue — at least $340,000 during the previous two years — to student services, University Properties attorney Brian Nagle said.

This includes allowing student resident assistants — who help dorm students with personal problems — to live in their rooms for free.

"They're critical to the care of the student," ESU President Marcia Welsh said of resident assistants. She cited RA help for a rape victim as an example.

Lawyers for the dorm operators said the nonprofit model is not uncommon for new dorm construction.

Nagle refuted an assertion that the dorms shouldn't be tax-exempt because they compete with private landlords for business. The new dorms replaced old campus housing that has been torn down, meaning no additional housing has been added, he said.

"It's really a totally different product than provided in the private market place," Nagle said.

East Stroudsburg School District attorney Christopher Brown argued the 5 percent donation really isn't a donation at all.

"Why not just say 5 percent goes to (all) students for their room and board?" Brown asked. "They're really just overcharging students to make up that 5 percent."

University Properties attorney Pat Scott called the RA room donations substantial and said it meets the charitable definition in a key court ruling on property tax exemptions.

Attorney John Prevoznik, representing East Stroudsburg Borough, called the donations a fiction.

"If you look at this lease "» they're saying they're being benevolent by giving away those rooms. It's not true," Prevoznik said. "It's being covered by the people who are paying for those rooms, because it's part of the ground rent."

"It's totally untrue," Nagle replied.

University Properties is operated by an all-volunteer board that receives no compensation, said its president, Bill Hibschman.

Assessment board attorney Mark Love asked opposing sides to file written briefs in time for the board to make a decision by its November meeting.